Last Year, Relational Finance Balance Surpasses 14 Trillion... Top Banks Shinhan and Nonghyup

The balance of 'relationship-based finance,' which provides funding to promising small and medium-sized enterprises (SMEs) and individual business owners, increased by 2 trillion won last year, surpassing 14 trillion won.

According to the 'Relationship-Based Finance Handling Performance' data released by the Financial Supervisory Service (FSS) on the 17th, the balance of relationship-based finance at domestic banks stood at 14.4 trillion won at the end of last year, up 2 trillion won (15.7%) from 12.4 trillion won at the end of the previous year. The FSS explained that this growth rate is more than twice the 7.6% increase in total SME loans by domestic banks last year, indicating a strong growth trend.

Relationship-based finance is a system where banks provide financial support by comprehensively evaluating not only the financial information of SMEs but also intangible information that cannot be quantified. Even if creditworthiness is low or collateral is insufficient, if the business outlook is deemed favorable, banks offer loans of three years or more, equity investments, and management consulting services.

By borrower type, loans to small and medium-sized corporations amounted to 10.3 trillion won (71.5%), while loans to individual business owners were 4.1 trillion won (28.5%). The growth was led by a 50.7% increase in loans to individual business owners compared to the previous year. Loans to small and medium-sized corporations increased by 6%.

The average interest rate for relationship-based finance was 4.29%, rising 1.46 percentage points from 2.83% at the end of the previous year due to base rate hikes, but it remained 0.9 percentage points lower than the SME loan interest rate (5.19%). The delinquency rate was stably maintained at around 0.33%, slightly up from 0.26% at the end of the previous year, the FSS stated.

According to the FSS, in the evaluation of excellent banks in relationship-based finance, Shinhan Bank and NongHyup Bank ranked first and second among large groups, respectively, while Kyongnam Bank and Gwangju Bank ranked first and second among small and medium-sized groups, respectively.

The FSS plans to encourage the activation of relationship-based finance supply through meetings with the banking sector and to induce support such as discovering promising companies through strengthened non-quantitative evaluations, long-term supply, and provision of management consulting. An FSS official said, "We plan to provide incentives such as publicly announcing the results of excellent bank selections and reflecting them in year-end awards."

This content was produced with the assistance of AI translation services.